Hong Kong is alive – Newspaper Kommersant No. 226 (7427) of 06.12.2022

The volume of trades in Hong Kong shares on the St. Petersburg Exchange in November almost doubled compared to the previous month and exceeded $130 million. Only this category of foreign securities has the right to buy unqualified investors, which supports demand for them. In addition, strong growth in the Hong Kong market has attracted speculative capital into this segment. However, experts point to high market risks of these securities.

Trading activity in Hong Kong shares – shares of Chinese companies listed on the Hong Kong Stock Exchange – is gradually increasing. According to SPB Exchange, published on Monday, December 5, in November the volume of trading in these securities amounted to HK$1.03 billion ($132 million), exceeding the figure of the previous month by 76%. At the same time, the share in the total volume of transactions of the exchange for the reporting month reached 3.7%, while the share of Hong Kong shares in the total number of securities traded on the SPB Exchange amounted to 3%. The opportunity to deal with Hong Kong shares appeared in July (see “Kommersant” dated July 20), since December 5, 79 Hong Kong shares have already been traded on the St. Petersburg Exchange.

Among the leaders in terms of exchange trading volume among Hong Kong stocks were Alibaba shares (58% of the total volume), XPeng Inc. and JD.com (17% each), Li Auto Inc. (almost 15%). Moreover, the trading volumes of Alibaba, JD.com and Li Auto shares in November were comparable to the trading volumes of their depository receipts (see table). These names are well known among investors, and various arbitrage strategies are being implemented with these securities, Georgy Vashchenko, Deputy Director of the Analytical Department at Freedom Finance Global, explained.

In addition, a dozen Hong Kong shares already have more than 1,000 transactions per day. “This is comparable to the number of transactions in US stocks in the period leading up to the opening of the main session in the US,” Mr. Vashchenko points out.

Hong Kong shares are available for purchase by unqualified investors. Meanwhile, the purchase of foreign securities of issuers from “unfriendly” countries (the vast majority of the listing of the SPB Exchange, including depository receipts of Chinese companies that have been listed in the US) from October 1 for them is significantly limited by the Central Bank (now there can be no more than 5 such securities % of the portfolio), and from January 1 it will be completely prohibited. This factor, according to Vasily Karpunin, Head of Information and Analytical Content at BCS World of Investments, played a role in a significant increase in volumes in the Hong Kong section.

Also, according to Mr. Karpunin, the very high amplitude of fluctuations in the Hong Kong market, which attracted speculative capital, played a role. According to the resource Investing.com, the Hang Seng index was the leader of growth, having risen by almost 27% in November, including information about China’s rejection of the principle of zero tolerance for COVID-19 diseases. At the same time, the American S&P 500 index added a little more than 5% during this time.

However, Hong Kong stocks carry significant market risks. Even in the “top-end” securities there is a very high volatility, Mr. Karpunin noted.

“Quotes can move by tens of percent over several sessions on corporate or general market news, in particular on messages about lockdowns,” he notes. In addition, there is a purchase tax on Hong Kong securities (HSE stamp duty of 0.13% of the transaction amount on each side), which limits speculative opportunities, Mr. Vashchenko points out.

In general, market sentiment has become more positive compared to the gloom that reigned in early October, said Viktor Tunev, chief analyst at Ingosstrakh Investments. In addition, there are significantly fewer blocking risks in the HKD segment, he believes. At the same time, according to Mr. Vashchenko, “so far this segment is the lot of a relatively small number of investors.”

Ksenia Kulikova